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Wirecard can't rule out 'considerable fraud' as billions go missing

Jill Petzinger
Germany Correspondent, Yahoo Finance UK
Markus Braun, CEO of Wirecard AG, an independent provider of outsourcing and white label solutions for electronic payment transactions attends the company's annual news conference in Aschheim near Munich, Germany April 25, 2019. REUTERS/Michael Dalder

German payments startup Wirecard (WDI.DE) is temporarily suspending its chief operating officer Jan Marsalek. The news followed revelations earlier on Thursday (18 June) that auditors could not find some €1.9bn (£1.7bn, $2.1bn) in cash in the company’s accounts.

Wirecard shares took a plunge of over 60% on the DAX on Thursday, after it said auditor EY had refused to sign off its accounts for 2019, as it could not confirm the existence of €1.9bn in cash balances on trust accounts.

"At present it cannot be ruled out that Wirecard has become the aggrieved party in a case of fraud of considerable proportions," the company chief executive Markus Braun said in a video statement released Friday.

EY said more audits were now needed, after two Asian banks that have been managing the company’s escrow were unable to locate accounts with about €1.9bn in funds, Wirecard said in a statement.

“It is currently unclear why the two banks have stated to the auditor that the confirmations are spurious. The trustee has announced to Wirecard AG that he will clarify the facts of the matter with the two banks managing the trust accounts at short notice,” Braun said.

The company said Thursday that the delay could mean billions in loans may need to be terminated immediately.

Marsalek, due to leave the role soon to head up business development, will now be replaced immediately by James Freis, who was teed up to start as head of the new Integrity, Legal, and Compliance department from July onwards.

Munich-based Wirecard joined Germany’s 30-company DAX in 2018, bumping Commerzbank out of the blue-chip index.

However it has been beset by regulator suspicions, with German financial regulator BaFin raiding its headquarters on 5 June as part of a probe into members of the management board for suspected market manipulation, based on “misleading signals” from Wirecard in the months of March and April.